Bid Rigging Research Articles

A Commentary on the Jurisdictional Challenges in the Rand- Dollar Exchange Manipulation "Cartel": Competition Commission of South Africa v Bank of America Merrill Lynch International Designated Activity Company [2023] ZACT 26 (30 March 2023)

Cartels are the most egregious of competition law transgressions, because they entail a concerted effort on the part of cartel members to deliberately distort the market through price fixing, bid rigging, market allocation and constraining the supply of goods and services. Despite efforts by national competition authorities in various countries to combat cartelism, cartels have proved to have long tentacles, often extending beyond borders and morphing into "cross-border cartels". This contribution discusses one of the major challenges that cross-border cartels poses to competition authorities, that of prosecutorial and penal jurisdiction. The note focusses on the "banking cartel" that has been and still is the subject of contentious litigation. In March 2023 the Competition Tribunal (the Tribunal) handed down judgment in the matter of the Competition Commission of South Africa v Bank of America Merrill Lynch International Designated Activity Company [2023] ZACT 26 (30 March 2023). There were several questions in the matter, including the jurisdiction of the South African competition authorities to investigate and prosecute firms not incorporated or operating in South Africa (pure peregrini). The Competition Commission (the Commission) had initiated proceedings in the Tribunal against a host of banks for alleged cartel conduct, and some of the respondent banks raised objections and exceptions relating to the jurisdiction of the South African competition authorities. The note observes that while national competition authorities may have prosecutorial jurisdiction against cross-border cartels, there is still a challenge in enforcing an order where cartels are non-resident in the country. The contribution also notes potential challenges to cartel enforcement on the African continent in light of the establishment of the African Continental Free Trade Area (AfCFTA). Due to the removal of various trade barriers, there is likely to be a rise in cross-border competition issues, including cross-border mergers and cross-border cartels. The note therefore discusses a pertinent issue, that of jurisdiction, which may well be a challenge within the AfCFTA.

Prevention and Detection of Bid Rigging in Public Procurement in India: Role of Artificial Intelligence

India’s National Crime Record Bureau’s report, ‘Crime in India’, stipulates that the conviction rate of economic crimes is only 29.4% which is way lesser than that of criminal conviction rate of 57%. Punitive measures under the Competition Act, 2002 are relatively less explored in the Indian context. This article is an attempt to examine the punitive measures in the Act, the evidence used for conviction and to see how the same deter the violators. An attempt is made to find out how the apex court in Rajasthan Cylinders case ( Rajasthan Cylinders and Containers Ltd v. UOI and Anr., 2018 SCC Online SC 1718.) might have diluted the already weak conviction rate of India. Artificial intelligence is used in many jurisdictions for cartel identification. The evidentiary standards in Indian jurisdiction in regard to cartel identification are almost equivalent to ‘beyond reasonable doubt’ instead of ‘preponderance of probability’. Need arises that the evidentiary jurisprudence of ‘reverse onus or reverse burden’, whereby shifting the burden of proof on the accused, should be used liberally in instances of anticompetitive practices. Did the apex court fail? If digital algorithms are there to guide and highlight the red flags in clandestine cartelization, how will the jurisdictions use them to counter the anti-competitive practices?

Implikacje w zakresie prawa ochrony konkurencji płynące ze wspólnego ubiegania się o zamówienie publiczne

In 2023, the European Commission adopted revised Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreement, following a thorough evaluation and review of the Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements. The chapter of the Guidelines on commercialization agreements was expanded to include a new section on bidding consortia and guidance on the distinction with bid rigging. The Commission proposed to use the term “bidding consortium” for simplicity instead of “joint bidding”. Public procurement and competition law aim to achieve similar goals. Coordinated actions of competitors may jeopardize the outcome of public procurement. This is particularly the case when several potential suppliers attempt to join forces in a public procurement. In the article, the authors analyze the legal framework of the EU Member States for assessing proposals resulting from joint activities and bidding. Particular attention is paid to the regulatory and practical constraints faced by suppliers and contracting authorities.

Implications of Bid Rigging Practices in Small Island Developing States: A Case Study

The Bid rigging on construction projects has a wider societal implication that has spanned beyond the parties to the contract. This has led to costly litigation actions and additional unaccounted transactional costs derived from taxpayers’ funding. This study utilized a qualitative approach, through an emic view of a contemporary case study between the Government of Trinidad and Tobago and several contractors on bid rigging practices. The findings revealed that recommendations indicated within a Commission of Enquiry could have prevented unlawful practices. This research justifies the need for systems to be in place to comply with procurement laws and the heightened need for enforcement of ethical practices in state organizations. This research can assist policy makers in determining areas that require updating in relation to procurement and contract management practices within the construction industry.

Detecting bid rigging in public auctions for procuring infrastructure projects: formulating the reference scenario for decision-making

Bid rigging is a fraudulent scheme in procurement auctions resulting in non-competitive bids awarded at prices above the competitive market. Bid rigging is a global problem that wastes public agencies’ resources and taxpayers’ money. While various methods and tools have been developed to detect bid rigging, it remains challenging for public agencies to identify what a competitive baseline auction looks like in the absence of collusion. Such a baseline is commonly known as a reference scenario, which involves analyzing the behavior of honest bids in previous auctions to determine if future bids could be collusive. Research on formulating reliable reference scenarios for bid rigging detection in the auctions of infrastructure projects has received limited attention. Hence, our paper analyses the key criteria required to develop a reference scenario for public agencies to detect bid rigging during an auction. Drawing on data from Brazilian public procurement and oversight agencies, a procedure for composing robust reference scenarios for detecting bid rigging in infrastructure first-priced auctions is presented and discussed. We then test our procedure’s generalizability using data from four countries (Australia, Brazil, Spain, and the United States) in two auction formats (i.e., capped and uncapped). A better understanding of the reference scenario formulation will allow public officials to increase the likelihood of detecting bid rigging when it exists and avoid flagging it as such when no collusive practices are involved.

Cartel leniency programme in India—why no race here?

Abstract This article evaluates the implementation of the cartel leniency programme by the Competition Commission of India (CCI) using comprehensive data covering all related decisions of the CCI from 2009 to 2021. All other things remaining the same prima facie discoveries of cartels should have resulted in a ‘shock’ to ex ante expected returns of cartels, thereby encouraging more leniency applications. But, we find no such results or rather no ‘race’ to the agency. A successful leniency programme requires a transparent and deterrent penalty, plus consistency in applying leniency provisions. However, inconsistencies in the choice of penalty base and uncertainties in determining final penalties while using mitigating and aggravating factors have led to a poor correlation of penalties with cartel gain or harm. Strategic or otherwise, this has encouraged appeals to the appellate authority, thereby reducing the effective penalty to levels below deterrence. Many acts of bid rigging have been penalized using less stringent criteria and, in a few circumstances, also provided the benefit of leniency. Further, while individuals concerned in leniency cases have always been penalized, the CCI has not been so consistent in non-leniency cartel cases. These asymmetries and ‘other’ costs create disincentives for exercising the leniency option. We offer suggestions for enhancing the possibility of a race to the agency.

Implementing e-procurement at the Zimbabwe’s National Pharmaceutical Company (NatPharm): Challenges and Prospects

This study explores the challenges and benefits of adopting electronic procurement (e-procurement) technologies to facilitate anti-corruption mechanisms, accountability and transparency in the procurement of pharmaceuticals at the National Pharmaceutical (NatPharm) Company in Zimbabwe. Pharmaceutical corruption is a serious threat to the attainment of Universal Health Coverage. It is imperative for the Government of Zimbabwe to adopt Information Communication Technologies (ICTs) to detect and prevent corruption and fraud, thereby, addressing leakages, mismanagement and theft of medicines, thereby, improving population health outcomes. The study used a qualitative exploratory case study approach and data was gathered through documentary review. The study findings reveal that, pharmaceutical procurement is highly vulnerable to corruption at NatPharm. Bid rigging, procurement-related corruption, bribery and nepotism characterise pharmaceutical procurement at NatPharm. The study recommends the adoption of a transparent e-procurement system with open contracting and integrity pacts to reduce corruption, increase transparency and accountability at NatPharm.

Juridical Analysis of the Practice of Tender Conspiracy for Periodic Maintenance of the Bateballa-Jatia Cs Road in the Work Unit of the Public Works and Spatial Planning Office of Bantaeng Regency APBD 2017 Fiscal Year

Various anti-competitive actions continue to occur in the procurement of government goods and services financed by the APBN and APBD. The intended anti-competitive practice is generally in the form of collusion in bidding for government procurement of goods and services. One of the cases of collusion is the KPPU decision No. 16/KPPU –I/2018 concerning violations of Article 22 of Law no. 5 of 1999 in the procedure for auctioning periodic maintenance work for the Batebella-Jatia CS road. The purpose of this research is to find out and analyze: (1) the occurrence of bid rigging in the procurement of goods and services; and (2) Application of the Tender Conspiracy Law against KPPU's Decision No. 16/KPPU-I/2018 concerning Tender for Periodic Maintenance Work for CS Batebella-Jatia Road. This research is a descriptive normative legal research using primary, secondary and tertiary legal sources. Data collection techniques using literature or documentation. Qualitative descriptive analysis was used in data analysis

Anti-Competitive Agreement

Abstract: This article presents a comprehensive analysis of anti-competitive agreements, shedding light on their detrimental impact on market competition and consumer welfare. Drawing upon legal precedents, economic theories, and case studies, the study examines various types of anti-competitive agreements, including price-fixing, market allocation, bid rigging, and more. By examining the tactics employed and their implications, this article aims to enhance the understanding of the anti-competitive practices prevalent in today's markets.

Bid Collusion in Public Procurement Law

Unlawful agreements restricting competition, also known as bid rigging, is one of the acts of unfair competition specified by antitrust law. Its occurrence is associated with many unwelcome market practices, which is why it is considered to be a highly undesirable phenomenon and eliminated from economic turnover. In the field of public procurement, the phenomenon of bid rigging is particularly harmful because it leads to the inefficient management of public funds. For this reason, the legislator has included rules that prevent bid collusion in public procurement law institutions, assisting the contracting authority in protecting the competitiveness of the procedure. This paper focuses on a comparative analysis of the model of bid collusion, regulated under the Act on Competition and Consumer Protection with the provisions of Public Procurement Law. The act distinguishes bid collusion as a prerequisite for the subjective exclusion of contractors and the rejection of bids submitted under conditions of an act of unfair competition. However, under the provisions of Public Procurement Law, the definition of bid collusion derived from antitrust law has been modified, which has measurable consequences for the application of these provisions by contracting authorities and judicial authorities.

DESAFIOS CONCORRENCIAIS DA NOVA LEI DE LICITAÇÕES: A MODALIDADE DE DIÁLOGO COMPETITIVO.

Context: This work is located in the context of transition between the old and the new general regime of public procurement and administrative contracts. Objective: This work intends to identify possible competitive challenges arising from the modality of competitive dialogue brought about by the New Law on Administrative Public Procurement and Contracts and to highlight points of attention for the control of anticompetitive conduct. Method: Deductive method Conclusions: Competitive Dialogue is subject to well-known practices of bid rigging, such as the withdrawal or coverage of bids and promises of subcontracting. In addition to the possibility of cartelization, the legal design of the modality also points to the risk of exchanging sensitive information between bidders and to the risk of directing the contract.

A Machine Learning Approach for Flagging Incomplete Bid-Rigging Cartels

AbstractWe propose a detection method for flagging bid-rigging cartels, particularly useful when cartels are incomplete. Our approach combines screens, i.e., statistics derived from the distribution of bids in a tender, with machine learning to predict the probability of collusion. As a methodological innovation, we calculate such screens for all possible subgroups of three or four bids within a tender and use summary statistics like the mean, median, maximum, and minimum of each screen as predictors in the machine learning algorithm. This approach tackles the issue that competitive bids in incomplete cartels distort the statistical signals produced by bid rigging and it outperforms previously suggested methods in applications to incomplete cartels based on empirical data from Switzerland.

Semicollusion and Full Collusion in Procurement Auctions

We examine different types of bid rigging in multi-attribute procurement auctions, namely, price fixing (semicollusion), under which bidders collude on price only, and cover bidding and market division (full collusion), under which bidders collude on both price and quality. We also consider the timing of collusion formation and its association with bidder participation. All types of bid rigging have a significant impact on price, but no systematic differences in effect are found between them.

A Study of Umbrella Damages from Bid Rigging

If noncartel firms adjust their pricing to the supracompetitive level sustained by a cartel, purchasers from noncartel firms may suffer umbrella damages. This paper examines the bidding behavior of noncartel firms against the Texas school milk cartel between 1980 and 1992. The largest noncartel firm bid less aggressively when facing the cartel. Structural estimation reveals that, per contract, damages due to noncartel firms bidding higher are at least 35 percent of damages caused by the cartel. Inefficiencies raise the winner’s cost by 5.9 percent. These results shed light on the importance of umbrella damages from a civil liability perspective.

Croatian Competition Authority Takes on the First Bid Rigging Cartel in Croatia

Croatian Competition Authority Takes on the First Bid Rigging Cartel in Croatia

A Legal Case on Bid Rigging of Electronic Identity Card Procurement in Indonesia

A Legal Case on Bid Rigging of Electronic Identity Card Procurement in Indonesia

CAN E-PROCUREMENT REDUCE BID RIGGING IN PUBLIC AUCTIONS?

Abstract The adoption of e-procurement may reduce bid rigging in public auctions by limiting in-person meetings of bidders. Using the data from construction auctions tendered by a Japanese local government where paper-based manual procurement is replaced by e-procurement, we find that the adoption of e-procurement reduced bids in a section of the market where the bids were initially higher than the other section of the market. The degree of reduction was smaller in an auction when the bidders were likely to be in the same industrial community, suggesting that the effect of e-procurement by limiting in-person meetings is smaller when the bidders have chances to communicate through other than the procurement processes.

Enhanced Digitalisation and Competition Law Enforcement in Slovakia

Abstract Digitalisation is a challenge from the regulatory point of view. Competition law, as a special type of regulation, is no exception to this. The article explores the risks of digitalisation, especially the ones related to the enhanced use of pricing algorithms. In theory, pricing algorithms are not easily assessed from the perspective of competition law, let alone its application in practice. The prohibition of anticompetitive agreements (pursuant to Article 101 of the Treaty on Functioning of the European Union (TFEU)) is applied with certain difficulty to agreements created by using pricing algorithms. This is an unfortunate situation, as horizontal agreements represent one of the worst infringements of EU competition law, including price cartels or bid rigging. Apart from presenting a theoretical background, the article dives into the practice of the Antimonopoly Office of the Slovak Republic (AMO) in order to assess which practical issues the AMO might face when applying the theoretical concepts. In sum, the article asks from a theoretical perspective which issues of competition law have been introduced (or deepened) by the enhanced digitalisation, looking in particular to pricing algorithms. On top of that, the article explores the issues which may be encountered in practice, taking the Slovak jurisdiction as the example. The willingness and feasibility of the AMO to enforce digital issues such as pricing algorithms is assessed based on the previous acts of the AMO as well as the new Act on Protection of Competition, adopted by the Slovak parliament on 11 May 2021.

Protection For Tender Participants Businesses That Are Losses Due To Collection According To Business Competition Law

The development of the Indonesian economy is aimed at improving the lives of people who are just and prosperous. This is an ideal that has been mandated in the 1945 Constitution and Pancasila. One of the obstacles in the Indonesian economy is the existence of monopolistic practices and unfair business competition in business or business in Indonesia. Tender conspiracy is one of the forms of action prohibited in the Anti-Monopoly Law because tender conspiracy is fraudulent and detrimental, especially to other tender participants who do not conspire, because automatically in the tender, the winner cannot be regulated, but rather who does it. the best bid is the winner and apart from that bid rigging is an anti-competitive act. Regarding the conspiracy, there is a KPPU Decision relating to this matter, namely the KPPU Decision Case Number 6 / KPPU-L / 2015 regarding the construction of the Barito Kuala Regency DPRD building and its Land Development, in its decision the KPPU Commission Council stated that Reported Party I (PT. Citra Kharisma Persada), reported II (PT. Cempaka Mulia Perkasa), reported III (PT Sumber Nor Abadi), reported IV (Pokja I in the Human Settlements Division of the Public Works Office of Barito Kuala Regency Fiscal Year 2013) was proven legally and convincingly violating Article 22 of the Law Number 5 of 1999. This research will discuss legal protections for business actors participating in tenders who suffer losses due to conspiracy in the KPPU's decision.

Dark Side Case: Layers of Corruption in the Car Wash Scheme

Petrobras is an oil and gas giant publicly traded in Brazil and in international stock markets such as the New York Stock Exchange. The company’s main shareholder is Brazil’s federal government. Political influence is at the center of Petrobras’ implication in a massive corruption scheme revealed in 2014. Brazilian Federal Police’s Operation Car Wash disclosed a wide corruption scheme involving Petrobras, members of the Brazilian public administration, and some of the top construction firms in the country. The case focuses on describing how corruption practices spread at Petrobras as well as on the company’s responses to the crisis initiated in March 2014. In the months that followed the scandal, former Petrobras executives involved in the scheme agreed to plea bargains and thus helped reveal an intricate network of corruption practices, including complex forms of bid rigging and bribery. Meanwhile, Petrobras announced the intention to create a Governance, Risk, and Compliance unit that would be in charge of various compliance initiatives. On the other hand, the company expressly denied liability and portrayed itself as a victim of the scheme. Based on rich information from the Car Wash scandal, the case addresses the following questions: what is organizational corruption and what are the main assumptions underlying the design and implementation of anti-corruption strategies?